Move to abolish special tariff for exporters under study

The federal government is considering abolishing the special energy tariff given to all export industries, including textiles, from October 1

September 30, 2022
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FAISALABAD/ISLAMABAD: The federal government is considering abolishing the special energy tariff given to all export industries, including textiles, from October 1.

The textile export industry in Punjab, which is already in hot waters mainly because of high energy cost as compared to the same industry in Sindh, has been asked to pay from October 1, 2022 per unit tariff of Rs43.45 as compared to the existing Rs22 (9 cents) per unit. To this effect, the Power Division has issued a directive to all Discos. This would increase the input cost manifold owing to which textile products of Punjab industry would no longer be competitive in the international market.

The office memorandum issued by the Power Division says that the Discos will provide electricity at Rs43.45 per unit to the export sector from October 1, 2022, and will end the supply at the rate of 9 cents per unit. The exporters will have to pay the industrial tariff at Rs43.45 per unit with 100 percent increase.

When contacted, secretary Power Division confirmed the development saying if the Ministry of Commerce arranges further subsidy from the Finance Division by October 1, the Power Division will continue to charge the subsidised tariff of 9 cents per unit from the export sector. He said it is the issue of the Ministry of Commerce to arrange the subsidy of Rs33.44 billion for continuation of the existing tariff of 9 cents per unit.

Top sources said that a meeting was held with Finance Minister Ishaq Dar on the issue but the new financial manager of the country ended the meeting by saying let him study the issue first and then he will hold a meeting with ministers of commerce, power, and petroleum divisions. However, the sources say that Prime Minister Shehbaz Sharif wants the authorities to continue to provide the export sector with electricity at 9 cents per unit as increasing exports is the priority of the government.

The previous government had already increased the price of electricity for the export industry from 7.5 cents to 9 cents and now this rate has further been escalated, which will hike the electricity bills of the export industry by almost double.

And if the government does not come up with a decision on time about the continuation of the existing tariff, they will have no option but to close down the textile units in Punjab, said many textile owners while talking to The News.

Right now, Punjab’s textile industry is paying $9 per MMBTU for gas whereas the export industry in Sindh is paying $3.5 for one MMBTU gas. And in the wake of this distortion within the country, the Punjab textile industry has started suffering.

Mian Latif, owner of a textile mill, told The News said that increasing the tariff up to Rs43.45 per unit will destroy the industry as already 100 out of 250 units have been closed down in the province. He said it was not viable to continue to run the weaving, spinning, and processing industry at the new tariff of Rs43.45 per unit. He said that textile exports have already dipped in the month of July by 13.2 percent. He suggested the government to ensure the same subsided tariff for the export industry across the country and also asked the government not to increase the tariff up to Rs43.45 per unit as it will serve nothing but destroy the textile sector in Punjab.

Khurram Mukhtar, representing the Pakistan Textile Exporters Association (PTEA) in Faisalabad, has expressed deep disappointment over the increase in electricity prices for textile exporters by the federal government.

He said that despite several assurances from the government to supply textile exporters with electricity at 9 cents per kilowatt and gas at 9 cents per MMBTU in the current year, the price of electricity and gas has gone up.

He added that by increasing the energy tariff, the foundation has been laid for ending the textile industry of Punjab. He said that due to this decision, textile mills will be closed and there will be a sharp decrease in exports and thousands of workers will become unemployed.

Khurram Mukhtar said that the textile exporters have booked export orders for the next six months due to the government’s assurances that the energy tariff will be maintained, but if the price of electricity was increased from October, there was no option for them except to close the production. He said that with this decision, Punjab textile’s energy tariff will be much higher than that of Sindh’s industry.